MRO Magazine

Webco Industries, Inc. Reports Fiscal 2016 Third Quarter Results


June 3, 2016
By Business Wire News

SAND SPRINGS, Okla.

Webco Industries, Inc. (OTC: WEBC) today reported results for our fiscal 2016 third quarter ended April 30, 2016.

For our fiscal 2016 third quarter, we incurred a net loss of $0.2 million, or a loss of $0.29 per diluted share, compared to net income of $0.5 million, or $0.64 per diluted share, for the third quarter in fiscal 2015. Net sales for the third quarter of fiscal 2016 were $78.5 million, a 23.8 percent decrease from the $103.0 million of sales in last year’s third quarter. The current quarter includes a non-cash gain of less than $0.1 million related to our interest swap contract, whereas the prior year third quarter includes a $0.5 million non-cash gain related to the interest swap contract.

For the first nine months of fiscal year 2016, we generated a net loss of $2.6 million, or $3.19 per diluted share, compared to a net loss of $0.2 million, or $0.27 per diluted share, for the same period in fiscal 2015. Net sales for the first nine months of the current year amounted to $246.3 million, a 21.8 percent decrease from the $315.1 million in sales for the same nine-month period of last year. Results for the first nine months of the current year include a $0.7 million non-cash loss related to the interest swap contract, whereas the prior year same nine-month period contained a $1.4 million non-cash loss on the contract.

In the third quarter of fiscal year 2016, we generated income from operations of $0.3 million, after depreciation of $2.9 million. Income from operations in the third fiscal quarter of the prior year was $1.3 million, after depreciation amounting to $3.1 million. Gross profit for the third quarter of fiscal 2016 was $6.3 million, or 8.0 percent of net sales, compared to $7.4 million, or 7.2 percent of net sales, for the third quarter of fiscal 2015.

We had a loss from operations for the first nine months of fiscal year 2016 of $1.6 million, after depreciation expense of $8.8 million, while income from operations for the same period in fiscal 2015 was $3.5 million, after depreciation expense of $9.0 million. Gross profit for the first nine months of fiscal 2016 was $15.7 million, or 6.4 percent of net sales, compared to $22.0 million, or 7.0 percent of net sales for the same period in fiscal year 2015.

Dana S. Weber, Chief Executive Officer, commented, “The industrial economy has continued to be difficult for almost all that are associated with the metal and energy industries. We were successful in purging some high cost inventories over the course of the quarter. The market price for steel sheet coil began increasing towards the end of the quarter and the tubing industry has raised sales prices in response. Expense and working capital management continue to be priorities in this lower demand environment. Since January 2015, we have reduced our inventories by $58.6 million, substantially on tonnage reductions, and our debt by $52.7 million.”

Selling, general and administrative expenses were $6.0 million in the third quarter of fiscal 2016 and $6.1 million in the third quarter of fiscal 2015. Selling, general and administrative charges were $17.3 million in the first nine months of the current fiscal year, a decrease from the $18.5 million in such expenses in the same period of fiscal 2015. The decline in SG&A results from our expense reduction efforts.

Interest expense was $0.6 million in the third quarter of fiscal year 2016 and $0.9 million in the third quarter of fiscal 2015. Interest expense decreased to $1.9 million in the first nine months of fiscal year 2016 from $2.4 million in the same period in fiscal year 2015. The decline in interest expense reflects lower debt levels.

We are party to an arrangement that swaps the variable interest rate for $50 million of our debt to a fixed rate through December 2019. We record the interest swap contract at fair value on our balance sheet and non-cash changes in value are reported as unrealized gains or losses on interest contracts. The non-cash income and charges from adjusting the interest swap contract value to market value create volatility in our income statement; however, they have no bearing on cash flow for the quarter because the actual monthly cash swap payments are reflected in interest expense, and therefore earnings.

At April 30, 2016, we had $5.8 million in cash in addition to $33.9 million of available borrowing under our senior revolving credit facility, which had $34.0 million drawn. The revolver has a $120 million cap with availability subject to advance rates on eligible accounts receivable and inventories.

Capital expenditures incurred amounted to $3.2 million in the third fiscal quarter of fiscal 2016 and amounted to $8.5 million for the nine month period then ended. These capital investments are focused on improving efficiencies, yields and quality.

Webco is a manufacturer and value-added distributor of high-quality carbon steel, stainless steel and other metal tubular products designed to industry and customer specifications. Our tubing products consist primarily of pressure tubing, including heat exchanger and boiler tubing, and specialty tubing for use in durable and capital goods. Webco’s long-term strategy involves the pursuit of niche markets within the metal tubing industry through the deployment of leading-edge manufacturing and information technology. We have seven production facilities in Oklahoma and Pennsylvania and five value-added distribution facilities in Oklahoma, Texas, Illinois and Michigan, serving customers globally.

Forward-looking statements: Certain statements in this release, including, but not limited to, those preceded by or predicated upon the words “anticipates,” “appears,” “available,” “believes,” “can,” “considering,” “expects,” “hopes,” “intended,” “plans,” “projects,” “pursue,” “should,” “would,” or similar words constitute “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance or achievements expressed or implied herein. Such risks, uncertainties and factors include the factors discussed above and, among others: general economic and business conditions, including any global economic downturn, reduced oil prices, competition from imports, including any impacts associated with the strength of the U.S. dollar, changes in manufacturing technology, banking environment, including availability of adequate financing, monetary policy, changes in tax rates and regulation, raw material costs and availability, appraised values of inventories which can impact available borrowing under the Company’s credit facility, industry capacity, domestic competition, loss of or reductions in purchases by significant customers and customer work stoppages, the costs associated with providing healthcare benefits to employees, customer claims, technical and data processing capabilities, and insurance costs and availability. The Company assumes no obligation to update publicly such forward-looking statements.

 
 
WEBCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)

 
    Three Months Ended     Nine Months Ended
April 30, April 30,
 2016        2015    2016        2015  
 
Net sales $ 78,488 $ 102,953 $ 246,280 $ 315,063
Cost of sales  72,226    95,555    230,592    293,103  
 
Gross profit 6,262 7,398 15,688 21,960
Selling, general & administrative  5,989    6,131    17,271    18,484  
 
Income (loss) from operations 273 1,267 (1,583 ) 3,476
Interest expense 607 865 1,895 2,446
Unrealized (gain) loss on interest contracts  (37)  (463)  723    1,390  
 

Income (loss) before income taxes

(298

)

865

(4,201

)

(360

)

Income tax expense (benefit)  (64)  345    (1,619)  (143)
 
Net income (loss) $(234) $520   $(2,581) $(217)

 

Net income (loss) per common share:
Basic $(0.29) $0.64   $(3.19) $(0.27)
Diluted $(0.29) $0.64   $(3.19) $(0.27)
 
Weighted average common shares outstanding:
Basic  812,100    808,300    809,400    806,600  
Diluted  812,100    810,300    809,400    806,600  
 

Note: Amounts may not sum due to rounding.

 
 
WEBCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(Dollars in thousands, except par value)

(Unaudited)

 
    April 30,     July 31,
2016 2015
 
Cash $ 5,849 $ 6,900
Accounts receivable, net 32,990 40,885
Inventories, net 108,597 139,191
Other current assets  9,777  8,466
Total current assets 157,213 195,443
 
Property, plant and equipment, net 90,850 91,226
Other long-term assets  1,205  2,505
 
Total assets $249,268 $289,174
 
Other current liabilities $ 26,017 $ 27,443
Current portion of long-term debt  34,048  69,959
Total current liabilities 60,066 97,402
 
Long-term debt 12,000 12,000
Deferred income tax liability 16,366 17,561
 

Total equity (812,900 common shares, par value $0.01,
outstanding at April 30, 2016)

 

160,837

 

162,211

 
Total liabilities and equity $249,268 $289,174
 
 
CASH FLOW DATA

(Dollars in thousands)

(Unaudited)

           
Three Months Ended Nine Months Ended
April 30, April 30,
2016    201520162015
Net cash provided by (used in)

operating activities

$

9,792

$

15,812

$

39,950

$

9,241

 
Depreciation and amortization $2,983 $3,155 $8,916 $9,122
 
Cash paid (refunded) for capital expenditures $3,146 $2,904 $8,184 $6,021
 

Note: Amounts may not sum due to rounding.

Webco Industries, Inc.
Mike Howard, 918-241-1094
Chief Financial Officer
mhoward@webcoindustries.com